Under the Belocal Transfer Agreement, what happens to the Franchise Agreement upon execution of the Transfer Agreement by the Franchisor?
Belocal Franchise · 2025 FDDAnswer from 2025 FDD Document
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- Termination of Franchise Agreement; Survival of Certain Covenants and Obligations. Except as provided for in Section 9. of this Transfer Agreement, upon execution of this Transfer Agreement by Franchisor, the Franchise Agreement will terminate automatically; however, Transferor and Transferor Principals, and each of them, remain bound by, and must comply with, those provisions of the Franchise Agreement, which by their nature survive termination and include, but are not limited to, confidentiality, non-solicitation, and noncompetition; payment of debts and taxes; indemnification; and the post-term obligations set forth in Section 11. of the Franchise Agreement. Further, Transferor and Transferor Principals will remain bound by the dispute resolution provisions set forth in Section 14. of the Franchise Agreement.
Source: Item 22 — CONTRACTS (FDD page 71)
What This Means (2025 FDD)
According to Belocal's 2025 Franchise Disclosure Document, when the Franchisor executes the Transfer Agreement, the original Franchise Agreement is automatically terminated. However, this termination does not release the transferor (the original franchisee) and their principals from certain obligations.
Specifically, the transferor and their principals remain bound by the provisions of the original Franchise Agreement that, by their nature, are meant to survive termination. These include clauses related to confidentiality, non-solicitation, and non-competition. They also remain responsible for the payment of any outstanding debts and taxes, indemnification obligations, and any post-term obligations outlined in Section 11 of the Franchise Agreement.
Furthermore, the transferor and their principals continue to be subject to the dispute resolution provisions detailed in Section 14 of the original Franchise Agreement, even after the transfer and termination of the original agreement. This ensures that any disputes arising from the original agreement can still be resolved according to its terms.